Some observers have attributed this sort of thing to the 2008 Dodd Frank financial reform legislation—specifically, the Volcker Rule, which mandates that banks stop speculating with their own money. As banks have begun winding down their in-house trading desks to comply with the rule, many traders have headed to places like Citadel. But the trend was under way well before Dodd Frank and will surely continue for one big reason: The moneymaking possibilities at hedge funds are much, much greater than they are almost anywhere else….
“The chasm between compensation on the sell side and on the buy side—and by the buy side, I mean the hedge funds that control the majority of AUM [assets under management], is enormous,” Weinstein said. “It has never been bigger, that divide….”
“If you want to make more income potentially in the next year or two, you may make that decision,” Fleming said. “If you want to have a career at a great firm, where it’s not just about the income, it’s about the work that you’re doing, the clients that you’re serving, you’re a key part of the financial services industry … then you might very well say, ‘I’m going to spend 20 or 30 years doing this at Morgan Stanley….’”
For traders, however, this kind of calculus may be a tad too intangible….
“Look, I think a lot of things factor into the decision,” Weinstein, the recruiter, said. “Money is usually paramount.”
Poor Banks Can't Compete With Hedge Funds in Hiring [Bloomberg Businessweek]
Goldman Sachs Traders Join Citadel in Hedge Fund Migration [Bloomberg]